As you probably know, AOL is — by far — the fastest growing online service in the country. Last month, we passed the 1.25 million subscriber mark, which means we tripled over the past year. This growth benefits you in many ways; we are, for example, now able to add a much wider range of content, and the discussions throughout AOL are much more active and interesting.

But, as you probably also know, there can also be a downside to rapid growth: it can result in occasional busy signals when trying to connect, or sluggish system response when you’re online. These periodic “growing pains” have been fairly visible — and rather embarrassing.

The primary purpose of this letter is to let you know what we’re doing to make investments in service quality for AOL as we plan for continued growth.

First, the facts. AOL now routinely handles in excess of 1,000,000 sessions each day. That’s up from about 250,000 a year ago. So the overall demands on the system have been unprecedented. The demands fall into three categories: computer capacity, network capacity, and customer support.

Over the past year, AOL has re-architected its system to maximize scalability and support higher speeds. We have, for example, transitioned many of the most popular applications to highly scalable UNIX servers. More importantly, we just completed migration to a new Fiber Distributed Data Interface (FDDI) local area communication system. The relevance of this technology is that it gives us about 10 times more inter-processor communication capacity, enabling us to rapidly add additional server capacity. We also track application load more closely, so we are able to install additional capacity if the responsiveness of a particular application starts to slow down.

Some of you have experienced difficulties from time to time connecting to AOL, most likely because your local access number is busy. You may have also experienced occasional “disconnects” or “hangs.” These are a function of insufficient network capacity at two points in the network: not enough modems at the local access node, and not enough trunk capacity in the wide area network.

Sprint, our principal network supplier, has been substantially increasing network capacity to address these issues. In most cities, Sprint has added more modems in the past 10 months than were added in the past 10 years! And the overall results have been very good: our measurements over the past 90 days show more than two times improvement in modem availability, and a ten time improvement in reliability. But we know there is still considerable room for improvement.

We are investing heavily in expanding network capacity. This week, for example, we announced that we are expanding our agreement with Sprintnet to include a broader range of capabilities, including wider 9600 bps access and the introduction of 14.4 kbps access in most major cities. We also announced that we are acquiring ANS, the company that built the backbone of the global Internet. By leveraging the ANS backbone and the ANS operations team, we will be able to offer higher speed access, including 14.4 kbps, 28.8 kbps and ISDN. These higher speeds are now in early stages of testing, and we plan an initial roll out to dozens of major cities in the first quarter of 1995.
(And I’m pleased to report that we will NOT charge you extra for higher-speed access!) I’ll certainly keep you posted on our progress in this important area.

Sprint now has 9600 bps access available in approximately 200 cities, and
14.4 kbps access available in approximately 100 cities. These tend to be the largest cities, so if you live in a small city or town you probably cannot take advantage of this higher speed capability at this time.

Sprint has separate phone numbers for 2400 bps access, but generally uses the same phone number for the 9600 bps and 14.4 kbps access. So, if you’re currently connecting at 2400 bps, you’ll need to go to keyword ACCESS to see if a higher-speed number is available. If you’re currently connecting at 9600 bps, and want to see if 14.4 kbps is now available for you, all you need to do is go to “Set Up” (click on the Set Up button after you start the AOL application, and before you sign on), and change the modem speed setting to 14.4 kbps. You may not always get in at the higher speed, because Sprint is still in the process of adding higher-speed access in some cities, and additional capacity in other cities. If you cannot yet get in at 14.4 kbps, AOL will connect you at the next highest available speed. And as soon as higher-speed access is available in your city, you’ll get in automatically at that higher speed.

A rapid increase in subscribers also translates into rapid increases in the demand for customer support, both for Technical Service and Member Services & Billing. We now have more than 300 specialists in our Technical Service group, and we have more than 150 in Member Services & Billing. This area of AOL was growing so fast, we were running out of space and qualified applicants here in the Washington D.C. area, so we recently opened a second support site in Tucson, Arizona. The Tucson site was just opened in August, but already is the home for more than 125 members of our support team.

As AOL grows, we intend to continue to make significant investments in computer capacity, network capacity, and customer support, to establish AOL as the quality leader in the online services industry.

Overall, our goal is to provide you (and, hopefully soon, all of your friends, relatives, and business associates) with the broadest range of content, through the most engaging interface, at the most affordable price, with the strongest underlying sense of community — and with an unparalleled
level of quality.

Although I wanted to focus on quality in this letter, there’s much to report
on in other areas as well. So here goes….

NEW SOFTWARE

We’ve been getting a lot of very positive feedback about our new multimedia user interface, released in October. If you didn’t get a copy in the mail, you can use the keyword UPGRADE to download the new software for free. And while you’re there, use the Suggestion Box to tell us what you think, and to
give us any suggestions you might have for improvement.

This multimedia interface will really come to life over the coming months, as more and more of our content partners redesign their areas to take advantage of the new presentation capabilities. To get a sample of the what’s coming, you can use keyword PHOTO FOCUS to see how some partners are already incorporating photos into their online areas.

NEW SERVICES

We continue to add a wide range of services. New additions in the past month include:

By the way, if you’re an investor in stocks or mutual funds, I hope you are
aware of the much wider range of services now available on AOL. A year ago, our personal finance offerings were rather sparse, but since then they’ve increased dramatically, with the addition of Investor’s Business Daily; the business sections of the New York Times, Chicago Tribune and San Jose Mercury News; a mutual fund database from Morningstar; a handful of forums including the very popular Motley Fool; and a Software Center. And there’s much more coming soon, including Business Week Online, an AOL exclusive! You can find it all under keyword PERSONAL FINANCE.

Bringing you a steady stream of innovative, exciting new content is a high priority for us. This month we announced the formation of “The AOL Greenhouse” — an entrepreneurial environment for the creation of unique online content and services. We’re seeking creative, risk-taking “infopreneurs” — and we already know that the best ideas come from our own members! Use keyword GREENHOUSE for more information.

INTERNET AND WORLD WIDE WEB

As I continue to get a lot of E-mail asking about America Online’s plans to add expanded Internet access, here’s a short summary:

Presently, our Internet Connection (KEYWORD: INTERNET) offers access to a number of popular Internet services, including electronic mail, Newsgroups, Databases, and FTP (Internet file transfer). You can use our E-mail gateway to send or receive mail from just about every E-mail system in the world.

The Newsgroup (“Usenet”) discussions cover more than 14,000 topics.
Databases (also known as “WAIS” and Gopher”) enable you to connect — with the simple click of a button — to information stored at Internet sites around the world. And FTP offers you easy access to the many thousands of files on the worldwide Internet.

Interest in access to the “World Wide Web” is growing rapidly. As I’ve reported in prior letters, we plan to make Web access available this Winter.

To advance this effort, last month we acquired two Internet companies:
BookLink Technologies, the creators of a suite of Internet applications called InternetWorks; and NaviSoft, the developer of advanced publishing
tools for media companies. BookLink won the “Rookie Of The Year” award from Byte Magazine at the Comdex computer show held a few weeks ago, and we are very excited about it. The BookLink technology is superior in features and performance to any of the Web products we’ve looked at. So, we’re on a fast path to provide you with the best and the most comprehensive Internet access, with the easiest and most powerful interface, at no extra charge.

FREE GIFT FOR AOL MEMBERS: 2MARKET CD-ROM

I’m also pleased to announce the launch of 2Market — an interactive personal shopping service that combines CD-ROM and online technologies. If you have a CD-ROM drive, use keyword 2MARKET, and click on the picture entitled “Free CD,” and we’ll mail you a copy of the 2Market CD-ROM free.

Whether or not you have a CD drive, use keyword 2MARKET to order products from merchants like Lands’ End, The Nature Company, Hammacher-Schlemmer, the Chef’s Catalog, and more.

2Market is the first offering from a new company we have formed with Apple Computer, and a young multimedia company called Medior. Its mission is to create the best multimedia shopping services for the new media industry.
I’ll fill you in as we provide additional CD products.

That’s the update for this month. I hope you all have a wonderful holiday season. I’ll touch base again as we kick off the new year.